Ask HN:How will Bitcoin futures affect the actual price?

1 points by tek-cyb-org 8 years ago | 5 comments

I don't understand how, since the Futures contracts do not get settled in Bitcoin, the for example, shorting of Bitcoin Futures, will affect the actual price. Can someone explain?

cwkoss 8 years ago |

People who have funds on both the Futures exchange and normal Bitcoin exchanges can arbitrage for free profit.

This could create some 'tail-wags-dog' behavior, but at this point it is anyone's guess how this will play out.

tek-cyb-org 8 years ago | |

hmm, I still don't quite understand. The bitcoin exchange would have to believe the futures market prices if I'm not mistaken. There wouldn't be an actual effect. Am I making sense?

cwkoss 8 years ago | | |

Say Bitcoin is trading at $15K on the bitcoin exchanges, and $14K on the futures exchange.

If someone has funds on both, they can sell on the bitcoin exchange and buy on the futures exchange to make $1K profit without changing their exposure, 'risk free'.

Unlike other kinds of arbitrage, however, because the futures settle in USD value, you'd have to move that USD to the exchange and rebuy to get back into a position to repeat. I think settling in USD will somewhat suppress the effect of futures market short pressure (have to rebuy to sell again, unless on exchange with naked shorts available to users with only USD balances), but only time will tell.